TITLE
Recommendation to adopt Specifications No. RFP HR16-109 and award contracts to Anthem Blue Cross for the Preferred Provider Organization (PPO), Health Maintenance Organization (HMO) and Medicare Supplement group health plans; UnitedHealthcare for the Medicare Advantage Plan; Scan Health Plan for the Medicare Advantage Plan; and Vision Service Plan (VSP) for the City’s vision plan. (Citywide)
DISCUSSION
City Council action is requested to award contracts to Anthem Blue Cross, Scan, UnitedHealthcare, and Vision Service Plan for health and vision benefit plans for active employees and retirees.
The Human Resources Department administers a comprehensive Employee Benefits Program (Program) for active and retired City employees and their qualified dependents with input and recommendations from the City’s Health Insurance Advisory Committee (HIAC). HIAC is composed of City employees representing each bargaining unit and representatives from the Human Resources Department. HIAC was created and codified in our labor agreements for the purpose of reviewing the status and solvency of the Program and making recommendations to the City Manager on proposed plan changes, benefit levels, and addition or deletion of plan benefits.
The Program covers approximately 4,000 active employees, 2,000 retirees, and 7,400 dependents. The health plan benefit represents the largest expense of the Program. The health plan costs are estimated at $76 million for the 2017 plan year.
The Human Resources Department and HIAC have been cognizant of the City’s fiscal pressures and the degree to which escalating health care costs are a factor in the City’s fiscal outlook. In an effort to address health care costs, the City issued a medical and vision plan Request for Proposals (RFP) to solicit competitive bids. In addition, the Human Resources Department, in cooperation with HIAC, implemented a Dependent Eligibility Verification Project aimed at ensuring the Program covers eligible participants and reducing unnecessary benefit expenditures by removing ineligible dependents. The Dependent Eligible Verification Project is in its final phase. This report will address the results of the RFP efforts.
Request for Proposal
On February 25, 2016, the City issued an RFP for its health and vision plans for active employees and retirees. The last time the City issued an RFP for benefit plans was in 2011. The RFP sought qualified proposals to provide more efficient and cost-effective health and vision alternatives with at least the same level (or greater) benefit, service and choice than that of the current carrier(s).
The RFP was advertised in the Long Beach Press-Telegram on February 28, 2016, and 4,204 potential proposers specializing in health and vision plans were notified of the opportunity. Of those proposers, 33 downloaded the RFP via the City’s electronic bid system. The RFP was made available from the Purchasing Division, located on the seventh floor of City Hall, and the Division’s website at www.longbeach.gov/purchasing <http://www.longbeach.gov/purchasing>. An RFP announcement was also included in the Purchasing Division’s weekly update of Open Bid Opportunities, which is sent to 22 local, minority, and women-owned business groups. Nine proposals were received on March 31, 2016. Of those nine proposers, none were Minority-owned Business Enterprises (MBEs), Women-owned Business Enterprises (WBEs), certified Small Business Enterprises (SBEs), or Long Beach businesses (Local).
Local Business Outreach
In an effort to align with the City’s outreach goal, Long Beach businesses are encouraged to submit proposals for City contracts. The Purchasing Division also assists businesses with registering on the Bids Online database to download the RFP specifications. Through outreach, 481 Long Beach vendors were notified to submit proposals, of which one downloaded the RFP and none submitted a proposal. The Purchasing Division is committed to continuing to perform outreach to local vendors to expand the bidder pool.
RFP Evaluation Process
As part of the evaluation process, the City used Alliant Employee Benefits Consulting (Alliant). Alliant helped analyze the proposals to ensure that the City receives the most cost-effective benefit plans while maintaining value for our employees and retirees. Alliant is a recognized leader in the public agency arena, with over 160 individuals dedicated to public agency employee benefit plans.
The proposals were evaluated based on the following criteria:
1. Financial cost and value;
2. Provider disruption and employee access;
3. Quality and member services; and,
4. Administrative support and account management.
A more detailed description of the evaluation criteria is provided in Attachment A. This information was provided in the RFP.
HIAC reviewed the proposers’ results and the analysis conducted by Alliant. Based on an analysis of the proposals, including cost, disruption and adherence to the provisions of the RFP, four proposers were invited for an in-person presentation and interview for the health plans and two proposers were invited for an in-person presentation and interview for the vision plan. A summary of the major points for each proposal is listed in a matrix (Attachment B).
As a result of this review, the analysis and the interviews conducted, HIAC submitted the following recommendations to fulfill the contracts for Plan Year 2017 (January 1, 2017 to December 31, 2017) for both active employees and retirees:
1. Anthem Blue Cross for the Preferred Provider Organization (PPO), Health Maintenance Organization (HMO) and Medicare Supplement group health plans;
2. UnitedHealthcare for the Medicare (PPO) Advantage Plan;
3. Scan Health Plan for the Medicare Advantage Plan; and,
4. Vision Service Plan (VSP) for the vision plan.
The proposers above were chosen based on meeting the RFP criteria and demonstrating capability, flexibility, and a strong commitment to partner with the City of Long Beach to meet the City’s needs. In addition, the proposers were determined to provide the best overall value for the City. As a result of the RFP, the overall cost of the plans will decrease for Plan Year 2017.
This matter was reviewed by Principal Deputy City Attorney Gary Anderson on July 12, 2016 and by Assistant Finance Director Lea Eriksen on August 11, 2016.
TIMING CONSIDERATIONS
Annual open enrollment for the 2017 health plan year will be conducted in mid-October and requires development of employee communication materials and implementation activities to occur in August and September. Therefore, City Council action is requested on August 23, 2016, so the Human Resources Department will have adequate time to prepare information for distribution to employees during September and October and transition to new vendors by January 1, 2017.
FISCAL IMPACT
Due to going out to the market for health care plans for this RFP process, and the recommended plan design and provider changes described in the companion City Council letter, it is anticipated that the City’s cost of the health benefit plans will decrease in 2017 and not increase with industry trend. There is sufficient appropriation for the City’s cost of the health benefit plans in the Proposed Fiscal Year 2017 budget in the Employee Benefits Fund (IS 391) in the Citywide Activities Department (XC). The award of these contracts will provide continued health coverage for approximately 4,000 active City employees. There is no local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
ALEJANDRINA BASQUEZ, DIRECTOR
DEPARTMENT OF HUMAN RESOURCES
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER